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Does Size Really Matter?

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  • Jonathan B. Berk

Abstract

If the size of firms is measured correctly, small firms do not necessarily earn higher returns than larger firms. Yet, this finding is not inconsistent with the empirical fact that firms with small market values earn higher returns. Modern financial theory predicts that when firm size is economically unrelated to return, the relation between firm market value and return will be negative; that is, firms with small market values will have higher expected returns than other firms.

Suggested Citation

  • Jonathan B. Berk, 1997. "Does Size Really Matter?," Financial Analysts Journal, Taylor & Francis Journals, vol. 53(5), pages 12-18, September.
    • Handle: RePEc:taf:ufajxx:v:53:y:1997:i:5:p:12-18
    DOI: 10.2469/faj.v53.n5.2112
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    Cited by:

    1. John H. Cochrane, 1999. "New facts in finance," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 23(Q III), pages 36-58.
    2. Gandhi, Priyank & Lustig, Hanno & Plazzi, Alberto, 2016. "Equity Is Cheap for Large Financial Institutions: The International Evidence," Research Papers 3454, Stanford University, Graduate School of Business.
    3. Priyank Gandhi & Hanno Lustig, 2010. "Size Anomalies in U.S. Bank Stock Returns: A Fiscal Explanation," NBER Working Papers 16553, National Bureau of Economic Research, Inc.

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